The latest economic news is still bleak with interest rates predicted to rise again so if you are in debt then seek help.
There are people and organisations out there to help people with debts before it becomes too much of a heavy burden.
Here are ways you can get help with debts
Do not let debt get on top of you, having debt can put a strain on our physical and mental health.
You can get help from a ‘debt advisor’ who will review your situation and offer the best possible way to manage the debt. Just gaining support from a debt specialist can really ease some of the tension and sleepless nights.
Debt management plan
A debt management plan is a plan you agree with your creditors to pay what you can over an agree time. This is for people that do have the funds to pay a little, but not all of the debt due at that time.
You can arrange a plan directly with your creditor or with a debt management company (must be authorised by the FCA).
The debt company will need all your financial records and then makes a proposal with our creditor.
Without an agreement, creditors can still ask for the full amount even if you keep up with payments.
Only unsecured debts.
An Administration order
An administration or is a a way to manage your debt if you already have a count court or High Court judgement against you and cannot pay in full.
This debt is under £5,000 and the payment is made directly to the court, the court then pays the creditors. The creditors can not take any action against you if payment is made via an administration order.
It is up to the court to work out how much debt to pay, how often and for hour long, they take care of the payments. The form is N92 on the Government website to complete and there will be a small fee for this.
Find out more form the website.
Individual Voluntary Arrangement
Insolvency is when an individual can not pay what they owe or when the value of assets is less than the money owed.
7,610 Individual Voluntary Arrangements (IVAs) registered per month in the three-month period ending October 2022.
An IVA is a legally binding arrangement to pay your debts by using an insolvency practitoner who will then pay the creditors whereby the pressures of dealing with the debt is relieved.
The specialist will work out how much you can pay and for how long.
The agreement will only start if the creditor holding 75% of debts agrees to the arrangement. An IVA stops creditors taking action against you.
A word of warning thought, the insolvency practitioner can make you bankrupt if you fail to keep up with payments. There is a register of IVA’s.
Breathing Space Scheme
Breathing Space is a ‘debt respite scheme’ which gives you some protection from creditors for a limited period of time.
The scheme gives you 60 days of temporary protection, in that time you must actively seek debt advise but it removes the pressure and anxiety of chasing creditors.
If you are getting treatment for mental health the protection may get extended for the length of your treatment and an extra 30 days.
If you get the protection approved you get:
- your creditors can not add interest of fees
- Your creditors can not contact you during your breathing space period
- Enforcement action will not be permitted
To apply you must find a debt advisor. This is a free service but check you are eligible from the Government website.
Debt relief order
DRO’s are used if a person owes less than £30,000 and does not have a property.
The benefit of a DRO is that the creditor can not recover the money without the courts permission, so you have some protection. You are discharged from your debt after 12 months.
You can apply using a debt advisor. Find out more about how you get a DRO.
Eligibility check
- You owe less than £30,000
- You have less than £75.00 per month spare cash to pay debts
- you have less than £2,000 of assets.
- You do not own a vehicle more than £2,000
- You have lived in UK for past 3 years
- you have not applied for a DRO in the past 6 years
There is more information about this on the Government website.
Filing for bankruptcy
If you decided to file for bankruptcy your case will be reviewed by an adjudicator at the Insolvency Service, they will decided if your bankruptcy claim can be filed.
- your assets will be used to pay off some or all of your debts
- you will be obliged to follow the bankruptcy restrictions
- you will be added to the insolvency register
Debt facts to consider
Personal or household debt in the UK credit cards and personal loans were responsible for the most unsecured debt. The buy now pay later (BNPL) has created new sources of debt for households.
- Household debt to income ratio is currently at 131.3% in the UK
- Total household debt is 2.04 trillion gbp
- Value of debt per adult is 52.24k usd
- Total gross consumer lending in the UK 27.09 billion gbp
- Outstanding consumer credit credit 212 billion gbp
Data from Statista
History of debt over time
In 2018, over 115,000 individuals were declared insolvent due to unmanageable debt, an increase of over 16% from the year before, and the highest figure for 7 years.
Recognising the warning signs
Financial pressures present themselves in many ways, and early action is the key to avoiding and navigating financial difficulties.
Summary
Do not let debt get on top of you, try and deal with it as soon as you feel it has become unmanageable and ask for help.
In some cases, you can speak to your creditor directly to arrange an acceptable monthly payment but if this is not possible then seek and intermediary that will arrange a debt plan on your behalf.
The national debt line have a host of information and further advice and a helpline to speak with someone.
